Monetary policy divergence is driving volatility in local asset values in markets around the world and investors should prepare for this volatility to continue, according to a Manulife Asset Management report.
As a result of the developing environment, the report suggests U.S. equity investors will need to be especially focused in their search for growth. For example, they can analyze opportunities in higher organic growth sectors such as technology, health sciences, and those with a greater domestic footprint such as small caps.
Fixed income investors may need to look further along the credit spectrum towards higher yielding securities or to examine new geographies such as emerging markets.
Read: Investing in emerging markets
While developed markets such as Canada, the United Kingdom and Sweden may be “placeholders of quality” in this environment, the report also identifies as opportunities fundamentally strong emerging economies with current-account surpluses such as Singapore, Thailand, Korea, the Philippines, Brazil and Mexico.
Overall, a period of heightened volatility brought about by potential monetary policy divergence means it’s important to be much more selective than investors were five years ago. With global monetary policy potentially about to fork, Manulife Asset Management believes it’s a good time to carefully examine the geographical, sectorial, currency and credit opportunities.
Read: Money managers bullish on equities, alternatives
“In so doing, investors may be better able to navigate around the oncoming volatility,” the report concludes.
Also read: